MOSCOW. (RIA Novosti political commentator Alexander Yurov.)
The press has once again been discussing the plans of major foreign car makers to acquire production facilities in Russia.
Several papers have mentioned Volkswagen's long-standing plans to assemble inexpensive VW cars in Russia, as well as Nissan's search for a place to assemble its vehicles.
Stories of these particular brands penetrating the Russian car market are nothing new. Volkswagen's plans to get its own production facilities in Russia date back to 1995. However, nothing has been done yet. Many experts even say that talks of car assembly will drag on at least until Russia joins the World Trade Organization (WTO), when supposedly conditions for making Volkswagen cars in Russia are optimal.
This is likely true. According to the Vremya Novostei daily, Volkswagen's board of directors has discussed scenarios for their Russian project, dubbed Top-Projekt Russland. The project envisages setting up production facilities in the country with cheap labor in 2007, i.e., by the time Russia is expected to join the WTO. VW regards construction of a car factory in the Moscow region as a priority option.
As for Nissan's plans in Russia, the situation is a bit more complicated. Earlier this year, representatives of the Japanese carmaker were in talks with their Russian counterparts on deploying assembly lines at the GAZ car factory. However, GAZ has never confirmed that the Nissan reps' visit had anything to do with launching assembly of Nissan cars there. Next, the press tried to "launch" production of Nissan cars at Moscow-based Avtoframos, a Russian-French joint venture. In that case, analysts probably hoped that Renault, which makes its Logan there, would attract a similar Japanese company to Russia.
However, as the saying goes, there's no smoke without fire. Since global brands are again said to be coming to Russia, it is likely to be true, though when this will happen remains unclear.
Interestingly, if the German project succeeds, VW will become a Russian car industry leader in terms of output. Volkswagen will assemble up to 200,000 cars a year in Russia; no foreign carmaker operating here currently exceeds 100,000. Korean car makers in Russia for several years now have managed to produce only about 90,000 units in total. The current record was set by Russian-U.S. project Chevy-Niva, branded as GM in Russia, which sold just under 60,000 cars last year. Other foreign manufacturers perform less impressively. However, Renault has recently gone for records with the launch of its Russian-assembled Logan cars in July 2005. The company hopes to reach 200,000 vehicles a year within two years. So far, Russian giant AvtoVAZ still leads the industry in terms of the cars assembled, churning out more than 700,000 cars a year.
Interestingly, 200,000 is turning into a magic number in Russia. Virtually all foreign companies planning to start assembling their cars in this country specify this production rate. Toyota plans to produce 200,000 units at its factory in the vicinity of St. Petersburg when construction is finished.
But not all of the promises seem to be equally realisitic. The least expensive version of Renault Logan sells in Russia at $8,999, while the most expensive one goes for $12,099. Demand for cars in this price bracket is the highest in Russia, with over 1 million sold every year. If all goes well, say, if Russian consumers like the project, it will be quite feasible to ensure a large production rate, especially since the Russian manufacturer now assembling Logan used to roll out up to 600,000 compact cars a year. Unfortunately, VW has virtually no cars in this price bracket, except possibly the Pointer. However, at about $11,000, it is too expensive for its class: In Russia, cars with similar characteristics cost less than $10,000. However, assembly in Russia may slash the Pointer's price by 15%, making it close enough to the prices of Russian cars.
Probably for this reason, according to Vremya Novostei, the German giant is intent on sealing all investment agreements relevant to Top-Projekt Russland before mid-December, when Hong Kong hosts WTO member states' consultations on admitting Russia into the Organization. This means that Volkswagen has found something to invade the Russian market with.
